Employee engagement does not mean employee happiness. Someone might be happy at work, but that doesn't necessarily mean they are working hard, productively on behalf of the organization. While company game rooms, free massages and Friday keg parties are fun--and may be beneficial for other reasons--making employees happy is different from making them engaged.

Employee engagement doesn't mean employee satisfaction. Many companies have "employee satisfaction" surveys and executives talk about "employee satisfaction", but the bar is set too low. A satisfied employee might show up for her daily 9-to-5 without complaint. But that same "satisfied" employee might not go the extra effort on her own, and she'll probably take the headhunter's call luring her away with a 10% bump in pay. Satisfied isn't enough.

Definition: Employee engagement is the emotional commitment the employee has to the organization and its goals.

This emotional commitment means engaged employees actually care about their work and their company. They don't work just for a paycheck, or just for the next promotion, but work on behalf of the organization's goals.

When employees care—when they are engaged—they use discretionary effort.

This means the engaged computer programmer works overtime when needed, without being asked. This means the engaged retail clerk picks up the trash on the store floor, even if the boss isn't watching. This means the TSA agent will pull a bag suspicious bag to be searched, even if it's the last bag on their shift.

Engaged employees lead to better business outcomes. In fact, according to Towers Perrin research companies with engaged workers have 6% higher net profit margins, and according to Kenexa research engaged companies have five times higher shareholder returns over five years.

How does employee engagement lead to higher stock prices? The ROI of engagement comes from what I call the Engagement-Profit Chain:

Engaged Employees lead to…

higher service, quality, and productivity, which leads to…

higher customer satisfaction, which leads to…

increased sales (repeat business and referrals), which leads to…

higher levels of profit, which leads to…

higher shareholder returns (i.e., stock price)

As former Campbell's Soup CEO, Doug Conant, once said, "To win in the marketplace you must first win in the workplace." Employee engagement is the key to activating a high performing workforce.